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CORRECTION – Results of Operations for the Six Months Ended June 30, 2018

American Overseas Group Limited Announces Net Loss Of $2.4 Million and Operating Loss of $1.5 Million For The Six Months Ended June 30, 2018

HAMILTON, Bermuda, Sept. 24, 2018 (GLOBE NEWSWIRE) --

This release corrects and replaces the previous press release issued today, September 24, 2018, at 18:14 ET by American Overseas Group Limited (BSX: AOREF.BH) (Pink Sheets: AOREF.PK). The corrections appear in the final table of the release.

American Overseas Group Limited (BSX: AOREF.BH) (Pink Sheets: AOREF.PK) (“AOG” or the “Company”) today reported consolidated net loss available to common shareholders of $2.4 million, or $51.30 per diluted share, for the six months ended June 30, 2018. This compares to consolidated net loss available to common shareholders of $8.2 million, or $182.08 per diluted share, for the six months ended June 30, 2017.

Year over year improvement in results were driven by improved results associated with the Company’s reinsurance of Puerto Rico-related credits in its financial guaranty segment. Book value per share at June 30, 2018 was $1,230.37, a decline from the book value per share of $1,308.58 at December 31, 2017. 

For the six months ended June 30, 2018, the Company had an operating loss of $1.5 million, or $32.4 per diluted share, compared to an operating loss of $13.4 million, or $297.14 per diluted share for the six months ended June 30, 2017. Operating income for the property and casualty segment in 2018 was $1.4 million, compared to the $0.3 million operating income in 2017 for this segment. The financial guaranty segment had operating losses of $3.9 million for the first six months of 2018, compared to financial guaranty operating losses of $14.9 million in the first six months of 2017. 

Net earned property and casualty premiums were $1.4 million for the first six months of 2018, which is 22% lower compared to $1.8 million for the same period in 2017. Loss and loss adjustment expenses were $0.9 million for the first six months of 2018, which was $1.5 million lower than the same period in 2017. Operating income in the property and casualty segment increased $1.1 million primarily due to improved underwriting margin.

The legacy financial guaranty portfolio of American Overseas Reinsurance Company Limited (“AORE”) continues to run-off satisfactorily, notwithstanding loss reserve increases mainly due to the Company’s continued exposure to Puerto Rico credits. The financial guaranty operating loss of $3.9 million in 2018 is significantly lower than the operating loss of $14.9 million in 2017 primarily due to reduced unfavorable development on outstanding losses.

Operating expenses of $7.0 million were comparable in the first six months of 2018 as compared to the first six months of 2017 of $6.9 million.

As part of its ongoing capital management efforts, the Company will continue to redirect excess capital within the group to debt reduction unless other compelling opportunities present themselves.

Forward-Looking Statements

This release contains statements that may be considered "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include, without limitation, the Company's expectations respecting the volatility of its insured portfolio, losses, loss reserves and loss development, the adequacy and availability of its liquidity and capital resources, its current run off strategy, its strategy for writing other reinsurance businesses and its expense reduction measures. These statements are based on current expectations and the current views of the economic and operating environment and are not guarantees of future performance. A number of risks and uncertainties, including economic competitive conditions, could cause actual results to differ materially from those projected in forward-looking statements. The Company's actual results could differ materially from those expressed or implied in the forward-looking statements. Among the factors that could cause actual results to differ materially are: (i) the Company's reviewing the results of our entire portfolio of policies. Management considers credit derivative policies as a normal extension of AORE’s financial guaranty business and reinsurance in substance.

Explanation of Non-GAAP Financial Measures

The Company believes that the following non-GAAP financial measure included in this press release serve to supplement GAAP information and is meaningful to investors.

Operating income (loss): The Company believes operating income (loss) is a useful measure because it measures income from operations, unaffected by non-operating items such as realized investment gains or losses. Operating income (loss) is typically used by research analysts and rating agencies in their analysis of the Company.

Information About the Company

American Overseas Group Limited is an insurance holding company incorporated in Bermuda and a tax resident of the United Kingdom. Its operating subsidiaries provide specialty property/casualty insurance, reinsurance and insurance management services. More information can be found at www.aoreltd.com

American Overseas Group Limited
info@aoreltd.com


American Overseas Group Limited    
Consolidated Balance Sheets     
(unaudited)    
As at June 30, 2018 and December 31, 2017    
(dollars in thousands)    
             
    June 30, 2018     December 31, 2017  
Assets            
Investments:             
Fixed-maturity securities held as available for sale, at fair value   $ 131,888     $ 81,028  
Equity investments held as available for sale, at fair value   6,216     6,437  
Cash and cash equivalents   32,942     40,173  
Restricted cash   12,056     66,535  
Accrued investment income   570     256  
Premiums receivable   80,240     81,264  
Reinsurance balances receivable, net   346,432     340,700  
Salvage and subrogation recoverable   337     1,708  
Deferred policy acquisition costs   115     101  
Intangible assets   4,800     4,800  
Goodwill   33,050     33,050  
Other assets   2,063     1,899  
Total Assets   $ 650,709     $ 657,951  
             
Liabilities and Equity            
Liabilities:            
Loss and loss expense reserve   $ 295,940     $ 304,773  
Unearned premiums   110,533     105,690  
Ceded premium payable   94,461     95,195  
Payable to general agents   977     1,479  
Funds withheld   50,721     44,985  
Accounts payable and accrued liabilities   2,364     3,057  
Redeemable preference shares: ($0.10 par value and $1,000 redemption value; authorized shares - 75,000;  issued and outstanding shares - 38,600 and 58,600 at June 30, 2018 and December 31, 2017, respectively)   6,915     10,312  
Derivative liabilities   279     342  
Notes payable   16,521     16,521  
Non-owned interest in VIE   300     300  
Interest payable   451     451  
Fair value adjustment   14,470     15,199  
Deferred tax liability   33     31  
Total Liabilities   593,965     598,335  
             
Shareholders' Equity:            
Common shares   4,612     4,556  
Additional paid-in capital   188,440     188,331  
Accumulated other comprehensive income    502     1,190  
Retained deficit   (142,863 )   (140,514 )
Total Shareholders' Equity   50,691     53,563  
Non-controlling interest of preferred shares of subsidiaries   6,053     6,053  
Total Equity   56,744     59,616  
             
             
Total Liabilities and Equity   $ 650,709     $ 657,951  

 See Notes to 2017 Consolidated Financial Statements available on American Overseas Group Ltd. Website at www.aoreltd.com

American Overseas Group Limited
Consolidated Statements of Operations
(unaudited)
For six months ended June 30, 2018 and 2017
(dollars in thousands, except share and per share amounts)
           
           
  Six months ended June 30,
  2018     2017  
Revenues          
           
Net premiums earned $   999     $   1,888  
Fee income 5,969     5,919  
           
Change in fair value of credit derivatives          
Realized (losses) gains and other settlements (0 )   91  
Unrealized gains 59     2,946  
           
Net change in fair value of credit derivatives 59     3,037  
           
Net investment income 1,123     886  
Net realized gains (losses) on investments 1     (221 )
Fair value adjustment (274 )   739  
Other income 41     348  
           
 Total revenues   7,918       12,596  
           
Expenses          
Losses and loss adjustment expenses 1,363     12,448  
Acquisition expenses 174     259  
Operating expenses 6,974     6,912  
Other expense 74     -  
Interest expense 1,096     1,188  
           
Total expenses   9,681       20,807  
           
           
Net (loss) available to common shareholders $   (1,763 )   $   (8,211 )
Income tax expense (2 )   (4 )
           
Net (loss) before dividends (1,765 )   (8,215 )
Dividends on preference shares of subsidiary (585 )   -  
           
           
Net (loss) available to common shareholders $   (2,350 )   $   (8,215 )
           
           
Net (loss) per common share:          
Basic $   (51.30 )   $   (182.08 )
Diluted (51.30 )   (182.08 )
           
Weighted-average number of common shares outstanding:          
Basic 45,808     45,120  
Diluted 45,808     45,120  

See Notes to 2017 Consolidated Financial Statements available on American Overseas Group Ltd. Website at www.aoreltd.com

 

AMERICAN OVERSEAS GROUP LTD.            
                               
NET INCOME AND OPERATING INCOME BY SEGMENT                      
                               
(dollars in thousands) June 30, 2018  
  Net income available
to common
shareholders
    Net realized loss
on sales of
investments
    Net change in
fair value of
credit derivatives
    Fair value
adjustments
$
    Amortization
of intangibles
Operating income  
Property and casualty:                              
                               
Net premiums earned $ 1,408                             $ 1,408  
Losses and loss adjustment expenses (946 )                       (946 )
Acquisition expenses (355 )                       (355 )
Fee income 5,969                         5,969  
Operating expenses (4,722 )                       (4,722 )
Amortization expense -                         -  
Income tax (2 )                       (2 )
Property and casualty 1,352     -     -     -     - 1,352  
                               
Financial guaranty:                              
                               
Net premiums earned (409 )               2,560       2,151  
Net change in fair value of credit derivatives 59           (59 )           0  
Losses and loss adjustment expenses (417 )               (1,924 )     (2,341 )
Acquisition expenses 181                 (569 )     (388 )
Operating expenses (3,367 )                       (3,367 )
Financial guaranty (3,953 )   -     (59 )   67     - (3,945 )
                               
Corporate and Investing                              
                               
Net investment income 1,123                         1,123  
Net realized loss on sales of investments 1     (15,601 )         $ 15,600       -  
Fair value adjustment (274 )               274       -  
Operating expenses 1,114                         1,114  
Interest expense (1,095 )                       (1,095 )
Other expense, net of other income (33 )                       (33 )
Corporate and investing 836     (15,601 )   -     15,874     - 1,109  
                               
Group total $ (1,765 )     $ (15,601 )     $ (59 )     $ 15,941       $ -
    $ (1,484 )

 

AMERICAN OVERSEAS GROUP LTD.
                           
NET INCOME AND OPERATING INCOME BY SEGMENT                  
                           
                           
(dollars in thousands) June 30, 2017
  Net income available
to common
shareholders
    Net realized loss
on sales of
investments
Net change in
fair value of
credit derivatives
    Fair value
adjustments
    Amortization
of intangibles
Operating income  
Property and casualty:                          
                           
Net premiums earned $   1,753                         $   1,753  
Losses and loss adjustment expenses (2,493 )                   (2,493 )
Acquisition expenses (199 )                   (199 )
Fee income 5,919                     5,919  
Operating expenses (4,713 )                   (4,713 )
Amortization expense -                     -  
Income tax (4 )                   (4 )
Property and casualty 263     - -     -     - 263  
                           
Financial guaranty:                          
                           
Net premiums earned 134             2,985       3,119  
Net change in fair value of credit derivatives 3,037       (2,946 )           91  
Losses and loss adjustment expenses (9,955 )           (2,039 )     (11,994 )
Acquisition expenses (61 )           (2,675 )     (2,736 )
Operating expenses (3,361 )                   (3,361 )
Financial guaranty (10,206 )   - (2,946 )   (1,729 )   - (14,881 )
                           
Corporate and Investing                          
                           
Net investment income 886                     886  
Net realized loss on sales of investments (221 )   221               -  
Fair value adjustment 739             (739 )     -  
Operating expenses 1,164                     1,164  
Interest expense (1,188 )                   (1,188 )
Other expense, net of other income 348                     348  
Corporate and investing 1,728       221 -       (739 )     - 1,210  
                           
Group total $   (8,215 )   $   221     $   (2,946 )   $   (2,468 )   $  -     $   (13,408 )

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